Federal Contractors May Be Able to Recover Costs Caused by the Government ShutdownThe current government shutdown is now the longest in U.S. history, and many federal contractors are incurring costs as a result of shutdown-related work stoppages and delays. Luckily, many federal contracts contain clauses that provide a potential avenue for recovery of such costs. Further, there are practical steps that contractors can take to increase their chances of recovering shutdown-related costs from the government.

What contract clauses might apply?

Several Federal Acquisition Regulation (FAR) clauses, including the following ones, could provide contractors with an avenue to recover costs incurred as a result of shutdown-related delays or work stoppages:

  • FAR 52.242-14 (Suspension of Work)
  • FAR 52.242-15 (Stop Work Order)
  • FAR 52.242-17 (Government Delay of Work)
  • FAR 52.243-2 (Changes – Cost-Reimbursement)
  • FAR 52.243-3 (Changes – Time-and-Materials or Labor-Hours)

It is very important to note that these clauses generally impose very short timeframes in which a contractor must provide the government with notice and/or assert its right to an adjustment. For instance, FAR 52.242-15 (Stop Work Order) requires a contractor to assert “its right to the adjustment within 30 days after the end of the period of work stoppage[.]”

How can my company increase its chances of recovering shutdown-related costs? 

One way federal contractors can increase their chances of recovering costs caused by the government shutdown is by setting up separate charge codes in their accounting systems to identify and segregate all costs incurred as a result of shutdown-related delays or work stoppages. These types of costs often include, but are not necessarily limited to:

  • Idle facility/staff/equipment costs
  • Costs to implement a stop work order
  • Severance pay if layoffs are necessitated
  • Recruiting costs for replacement employees
  • Unabsorbed overhead
  • Remobilization costs once work recommences

Moreover, contractors would be wise to document justifications for shutdown-related costs and document steps taken to mitigate the impact of the shutdown.

Finally, contractors should document any and all communications with the government regarding shutdown-related delays and work stoppages, as these may come in handy if the government attempts to invoke the Sovereign Acts Doctrine as a defense against a contractor’s claim for shutdown-related costs.

Wait, I have more questions!

If you have any questions about the topics discussed in this article or about any related issues, please do not hesitate to contact Aron Beezley.

Fifth Circuit Reverses Course after 37 Years; Holds OSHA Has Authority to Enforce Multi-Employer Citation PolicyOn November 26, 2018, the Fifth Circuit released its opinion in Acosta v. Hensel Phelps Construction Co., which held that despite prior rulings to the contrary, OSHA is authorized to issue citations against contractors for safety violations regardless if the employer actually employs the employee(s) exposed to the hazard.

Under OSHA’s multi-employer worksite policy, an employer who causes a hazardous condition, often referred to as the “creating employer” or a general contractor or other employer having control over a worksite who should have detected and prevented a violation through the reasonable exercise of its supervisory authority, often referred to as a “controlling employer” may be cited for a violation, whether or not its own employees were exposed to the hazard. Generally, this gives compliance officer’s authority to issue citations to general contractors responsible for safety violations of subcontractors and others not employed by the general contractor.

However, in 1981, the Fifth Circuit held that OSHA’s multi-employer worksite policy was unenforceable in Texas, Louisiana and Mississippi because an employer can only receive a citation for safety violations that expose its own employees to the hazard. Fast forward thirty-seven years – the Fifth Circuit was given the opportunity to confirm this holding but decided to side with seven other circuit courts and ruled that OSHA has the authority “to issue a citation to a general contractor at a multi-employer construction worksite who controls a hazardous condition at that worksite, even if the condition affects another employer’s employees.”

The factual background of the case helps set the stage for the Fifth Circuit’s decision. Hensel Phelps was hired as the general contractor to build a public library in Austin, Texas. Hensel Phelps subcontracted portions of the work, including the excavation on the project. The regional OSHA office received complaints about safety issues for the project, so a compliance officer conducted an inspection at the worksite. The compliance officer found subcontractor employees working next to an excavated wall without proper sloping or other protections from cave-in hazards. The compliance officer reported that Hensel Phelps knew of this practice and directed subcontractors to continue work regardless. This investigation prompted OSHA to issue citations for violations of the cave-in protections under the general trenching and excavation rules. Hensel Phelps received a willful citation from OSHA under OSHA’s multi-employer worksite policy even though Hensel Phelps employees were not exposed to the hazard. Under the multi-employer worksite rule, OSHA could issue citations to more than one employer for a hazardous condition regardless if the employer actually employs the employee(s) exposed to the hazard.

Hensel Phelps appealed the citation to the Occupational Safety and Health Review Commission (the “Commission”). The Commission found that Hensel Phelps had sufficient control and authority over the jobsite including the sub-subcontractor and the employees working in the cited condition. The Commission pointed out that normally, the citation would be affirmed under applicable Commission case law. However, the Commission acknowledged that the project was located in the geographical jurisdiction of the Fifth Circuit which did not recognize the multi-employer worksite rule. Thus, the Commission ordered that Hensel Phelps could not be liable for an OSHA violation based solely upon a subcontractor’s employees’ exposure to the dangerous condition.

OSHA, through the Secretary of Labor’s office, appealed the Commission’s decision to the Fifth Circuit Court of Appeals in an attempt to overturn the Fifth Circuit’s prior rulings. On November 26, 2018, the Fifth Circuit issued an opinion in the case reversing 37 years of precedent. Specifically, the Fifth Circuit indicated that its prior decision in 1981 was obsolete and given changes in the law (mainly due to US Supreme Court decisions), the courts should defer to the Secretary of Labor’s interpretation of the statutes it enforces.

Contractors operating in the region should be mindful of this change in the law as it affects risk management and safety issues on almost all construction projects. OSHA officers will likely be briefed on the change and ready to apply it to each job site they visit. While contractors should always be mindful of safety on the job, they should pay particular attention to ensure that all subcontractors on a job site are following the contractor’s safety protocols.

Cannabis and the Contractor: Effective Drug Testing Policy and ComplianceAlthough marijuana is an illegal drug under federal law, a majority of states have now legalized its use in one form or another. Additionally, Canada recently legalized the use of marijuana, and proposals for loosening America’s federal prohibition abound in Congress. This rapidly evolving legal landscape presents new challenges for contractors (and other employers), particularly those working in several states. Contractors must balance complying with often divergent federal and state laws, maintaining a safe work environment, and protecting employees’ rights. Although difficult at times, there are steps contractors can take to help navigate this legal minefield successfully.

Maintain a Safe Workplace and Jobsite

The Occupational Safety and Health Act’s general duty clause requires contractors to maintain a safe jobsite and work environment “free from recognized hazards that are . . . likely to cause death or serious physical harm.” Construction sites already contain a number of hazards that can result in personal injury, and an employee’s impairment due to drugs or alcohol can seriously increase the danger to persons and property. Accordingly, most contractors have zero-tolerance policies that ban the use of alcohol and illegal substances. Although zero-tolerance policies typically permit an employee to avoid adverse employment actions by disclosing the use of prescription drugs prior to a positive drug test, these policies otherwise prohibit the off-site consumption of alcohol or drugs that will result in a positive test. The legalization of medical marijuana in a number of states has made maintaining a zero-tolerance policy more difficult.

In some states, contractors must accommodate an employee’s use of medical marijuana. For example, in Noffsinger v. SSC Niantic Operating Co., LLC, a Connecticut federal court held that a federal contractor could not enforce its zero-tolerance drug policy against a medical marijuana user. Similarly, Oklahoma law prohibits contractors from discriminating or punishing an employee based on the employee’s status as a medical marijuana card holder or a positive drug test for marijuana or its components unless the employer would lose a benefit under federal law or regulations. Although these statutes do not prohibit contractors from disciplining employees who consume marijuana, or are under its influence, while on the jobsite, it may be difficult to determine when an employee is actually impaired and a drug test is warranted. This difficulty can give rise to liability for discriminatory drug testing or wrongful employment actions in instances where a contractor is mistaken.

Other states that have legalized medical marijuana do not require a contractor to accommodate employees’ use. In California, for example, a contractor can dismiss an employee who tests positive for marijuana and its components. Likewise, under Ohio law, contractors are not prohibited from refusing to hire, discharging, or disciplining a person because of the use or possession of medical marijuana, nor are contractors prohibited from establishing and enforcing a zero-tolerance drug policy.

Between these two ends of the accommodation spectrum, a number of states’ laws provide for varying levels of accommodation for employees’ medical marijuana use. In Illinois, for example, contractors are prohibited from discriminating against employees and job applicants who qualify as a medical marijuana patient unless the accommodation would result in the violation of a federal law or the loss of a federal benefit. Nonetheless, Illinois contractors may still impose reasonable limitations on the consumption of medical marijuana and enforce zero-tolerance and drug-free work place policies as long the policies are applied in a non-discriminatory manner. Other states, such as Delaware, Nevada, New York, and West Virginia, have similarly varied degrees of required accommodation.

To help navigate these nuanced laws, contractors, especially those with a multi-state footprint, should develop a well-defined drug policy and administer a drug testing program in a non-discriminatory manner.

Develop a Well-Defined Drug Policy

Developing a well-defined company policy on marijuana use will minimize the risk of harm to persons and property, and decrease the likelihood that drug testing and disciplinary action arising from marijuana intoxication will open the door to liability for adverse employment decisions. At a minimum, contractors should ensure that a company drug policy:

  • Defines the terms “marijuana,” “cannabis,” or any other derivation of the drug. Simply prohibiting the use of “illegal drugs” can create ambiguity because of marijuana’s legal status in various jurisdictions.
  • Indicates that the use of marijuana, whether recreationally or on the job, is strictly prohibited.
  • Articulates drug testing policies and procedures (including penalties for failing a drug test).
  • Educates employees on clinical issues relating to marijuana, such as its effects on the body, the length of time it can continue to impair cognitive and physiological functions, and the potential impacts on workplace safety and performance.
  • Is included in recruiting and new-hire onboarding materials to ensure notice to the individual.

 Consistently Administer a Drug Testing Program

Once a contractor adopts a drug policy, it is critical that drug tests are conducted uniformly for all employees. Failure to do so can subject a contractor to liability for discrimination claims that arise from adverse employment actions.

If an employee tests positive for marijuana, the recourse available to a contractor can vary greatly under federal and state laws. For example, the Americans with Disabilities Act (ADA) currently does not shield an employee from adverse employment actions for using marijuana to treat a disability, even if the employee refrains from using medical marijuana while on the job. The ADA exempts from its scope the “illegal use of drugs” and defines that term to include any substances that are unlawful under the Controlled Substances Act, which currently lists “marihuana” as a banned substance. As a result, at least under the ADA, contractors can terminate an employee who tests positive for marijuana, even if that employee is disabled, prescribed medical marijuana, and only uses marijuana on his or her own time. Note, however, that under the ADA, if an employee discloses a disability and requests an accommodation, a contractor is required to consider reasonable accommodations, which could include transfer to a non-safety sensitive job (where the marijuana use may not pose a safety concern) or for temporary leave during treatment.

By contrast, as discussed above, some states require an employer to accommodate an employee’s use of medical marijuana and prohibit a contractor from terminating an employee for a failed drug test for marijuana use. Contractors should be mindful of the potential for conflict between their own drug testing policies and requirements mandated by federal or state laws. If there are questions as to what actions a contractor can take against an employee for failing a drug test, contractors should seek the advice of legal counsel.

The Measure of Success

An effective drug policy decreases hazards and promotes an accident-free work environment. While state and federal laws meant to promote this goal may seem straight forward when read in isolation, problems arise when these laws overlap or conflict with one another. The growing number of states legalizing marijuana use, and the nuanced differences between laws, will only amplify this problem. Although all contractors need to implement well-defined policies and procedures, it is particularly important that contractors operating in any of the 30 plus states in which marijuana is now legal in some form take time to review current policies and evaluate the need for changes to ensure employee safety and reduce company risk.  If you have questions about this rapidly changing legal issue, you should contact an attorney with experience in this emerging area of the law.